ATO, Atmos Energy Corp
We safely deliver reliable, efficient, and abundant natural gas through regulated sales and transportation arrangements to approximately 3.4 million residential, commercial, public authority, and industrial customers in eight states located primarily in the South.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- Revenue is Distribution (94%) and Pipeline and Storage (6%).
- Situation
- Capital build-out. capital spending has surged to 76% of sales, today's earnings are charged less depreciation than tomorrow's will be.
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median 6%, above 15% in 0 of 10 years). Owner earnings, the cash-based check, have been thin too. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the 10-K is where you look.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
Where the money comes from
read the 10-K →Distribution is 94% of revenue, so this is largely a single-segment business.
- Distribution94%$4.4B
- Pipeline and Storage6%$280M
From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $2.5B | $2.8B | $3.1B | $2.9B | $2.8B | $3.4B | $4.2B | $4.3B | $4.2B | $4.7B | $4.9B |
| Operating marginOp. mgn | 26.8% | 26.7% | 23.4% | 25.7% | 29.2% | 26.6% | 21.9% | 25.0% | 32.5% | 33.2% | 35.9% |
| Net incomeNet inc. | $350M | $396M | $603M | $511M | $601M | $666M | $774M | $886M | $1.0B | $1.2B | $1.3B |
| EPS (diluted)EPS | $3.38 | $3.74 | $5.43 | $4.35 | $4.89 | $5.13 | $5.61 | $6.10 | $6.83 | $7.47 | $8.09 |
| Owner earningsOwner earn. | ($292M) | ($270M) | ($343M) | ($725M) | ($898M) | ($3.1B) | ($1.5B) | $654M | ($1.2B) | ($1.5B) | ($2.0B) |
| ROICROIC | 7% | 7% | 9% | 6% | 6% | 5% | 5% | 5% | 6% | 6% | 6% |
| CapexCapex | $1.1B | $1.1B | $1.5B | $1.7B | $1.9B | $2.0B | $2.4B | $2.8B | $2.9B | $3.6B | $3.9B |
| Capex / revenueCapex/rev | 44.3% | 41.2% | 47.1% | 58.4% | 68.6% | 57.8% | 58.2% | 65.6% | 70.5% | 75.7% | 79.2% |
| Capex vs depreciationCapex/dep | 3.71× | 3.56× | 4.06× | 4.33× | 4.50× | 4.12× | 4.56× | 4.64× | 4.38× | 4.85× | 5.08× |
| Total debtDebt | $2.4B | $3.1B | $3.1B | $3.6B | $4.6B | $7.4B | $8.0B | $6.6B | $7.8B | $9.0B | $9.6B |
| Cash & investmentsCash+inv | $48M | $26M | $14M | $25M | $21M | $117M | $52M | $15M | $307M | $203M | $126M |
| Net debt / (cash)Net debt | $2.4B | $3.0B | $3.1B | $3.5B | $4.5B | $7.3B | $8.0B | $6.6B | $7.5B | $8.8B | $9.5B |
Owner’s Scorecard
Will it survive?
- ComfortableOperating income $1.6B ÷ interest expense $172M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- HeavyTotal debt $9.0B ÷ operating income $1.6B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $8.8BHeavy net debtCash $203M − debt $9.0B
Netting $203M of cash and short-term investments against $9.0B of debt leaves $8.8B owed, about 5.6× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Negative, funded by othersDSO 29 + DIO 0 − DPO 127 days
Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)
Is it a good business?
- Below averageNOPAT $1.3B ÷ invested capital $22.3B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Consumes cashOwner Earnings ($1.5B) = operating cash $2.0B − capex $3.6B
What an owner could take out without starving the business. That's -32% of revenue. Treating stock comp as the real expense it is (less $13M of SBC) leaves ($1.5B). Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $2.0B ÷ net income $1.2B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- No surplus to allocate
The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing, not from operations.
- Investing or harvesting? 4.85×ExpandingCapex $3.6B ÷ depreciation $735M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 10 of 10
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 0 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 27% (FY2016) → 33% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC 4%
Reinvested capital earned only a modest return, growth is getting expensive.
- Worst year 2022 · 21.9% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count +5.0%/yr
The share count is rising, dilution works against you on a per-share basis.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2016–2025
Over the record, the business generated $11.9B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a reinvestor, most operating cash is plowed back into the business.
- Reinvested$21.0B · 176%
- Dividends$3.3B · 28%
It reinvested $21.0B (176%) back into the business and returned $3.3B (28%) to owners, $3.3B in dividends, $0 in buybacks. Total debt rose $7.2B across the span. It returned and reinvested more than it generated, the gap was covered by debt or existing cash.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
read the proxy →Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- CEO pay ratio106:1
What the chief earns for every dollar the median employee makes, per the 2025 proxy. A high ratio isn't proof of anything, some businesses are genuinely top-heavy in scarce skill, but a runaway figure is where Buffett starts asking whether the board is doing its job or just keeping the chair company.
- Stock-based compensation$13M
The slice of the business handed to employees in shares this year, 0% of revenue, equal to 1% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
4 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $4.7B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 0.77×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $9.0B vs ($310M) WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (10-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +132%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $7.47/share and book value $84.44/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFOwner earnings are negative today, so the usual reverse-DCF has nothing to grow. But that's exactly when a price makes its boldest promise. So we flip the question: type a price, and see the future profitability you'd have to believe to justify it.
Enter a price to run it.
It flips the reverse-DCF: the company must reach owner earnings that, valued at a mature multiple and discounted back at your rate, equal today's market cap, shown as the margin it must earn on revenue grown at your rate, from negative today. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this is for the genuinely unprofitable.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Customer concentrationMD&A
Who the revenue leans on. When one buyer is a large slice of sales, that buyer holds the pricing power, and its troubles become the company's.
“This risk is currently mitigated by rate design that allows us to collect from our customers the gas cost portion of our bad debt expense on approximately 89 percent of our residential and commercial revenues.”
From the recordRevenue exposed (TTM)$4.9B - Litigation & contingenciesMD&A
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“All statements other than statements of historical fact included in this Report are forward-looking statements made in good faith by us and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyBusiness
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Authorization in tariffs, statute or commission rules that allows us to defer certain elements of our incurred cost of service such as depreciation, ad valorem taxes, pension costs, and certain safety related expenses, until they are included in rates.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “We anticipate making significant capital expenditures for the foreseeable future to modernize our distribution and transmission system, to comply with the safety rules and regulations issued by the regulatory authorities responsible for the service areas in which we operate, and to prepare to serve …”
- “The magnitude and allocation of these expenditures may be affected by factors such as new policy and regulations, population growth, and increased labor and materials costs.”
- “Although we believe these costs are ultimately recoverable through our rates based on the regulatory frameworks currently available to us, full recovery is not assured.”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Gas utilities
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| OKEOneok, Inc. | $33.6B | 30% | 17.1% | 8% | 7% |
| LNGCheniere Energy, Inc. | $19.5B | 76% | 46.8% | 23% | 13% |
| TRGPTarga Resources Corp. | $17.0B | 38% | 19.6% | 13% | 3% |
| KMIKinder Morgan, Inc. | $15.2B | 39% | 31.1% | 5% | 19% |
| WMBThe Williams Companies, Inc. | $14.9B | 77% | 28.2% | 8% | 7% |
| ATOAtmos Energy Corp | $4.7B | 69% | 33.2% | 6% | -32% |